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30 Nov 2005, 15:44

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A

B

C

D

E

Difficulty:

(N/A)

Question Stats:

57%(01:51) correct
43%(00:47) wrong based on 31 sessions

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Consumers in California seeking personal loans have fewer banks to turn to than do consumers elsewhere in the United States. This shortage of competition among banks explains why interest rates on personal loans in California are higher than in any other region of the United States.

Which of the following, if true, most substantially weakens the conclusion above?

(A) Because of the comparatively high wages they must pay to attract qualified workers, California banks charge depositors more than banks elsewhere do for many of me services they offer.

(B) Personal loans are riskier than other types of loans, such as home mortgage loans, that banks make.

(C) Since bank deposits in California are covered by the same type of insurance that guarantees bank deposits in other parts of the United States, they are no less secure than deposits elsewhere.

(D) The proportion of consumers who default on their personal loans is lower in California than in any other region of the United States.

(E) Interest rates paid by California banks to depositors are lower than those paid by banks in other parts of the United States because in California there is less competition to attract depositors.

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01 Dec 2005, 01:09

yup I got A not entirely convinced but the best in the bunch.

B. doesn't give us any clue, buecause we are told about the interest in personal loan for rest of the country. we don't know in rest of the country whether the interest rate for mortgage is higher or lower.

C. doesn't give a reason why interets rete on personal loan will be higer in CA.

D. this information simply says that interest rate on personal loan will be lower in CA due to lower default risk. now because we are tryinig to refute a causal argument, in order to weaken the argument, we need to find another reason that contributes to the conclusion, not a premise that changes the conclusion.

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01 Apr 2012, 21:11

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cangetgmat wrote:

pls explain choice D, i am inclined for D

Consumers in California seeking personal loans have fewer banks to turn to than do consumers elsewhere in the United States. This shortage of competition among banks explains why interest rates on personal loans in California are higher than in any other region of the United States.

Which of the following, if true, most substantially weakens the conclusion above?

(A) Because of the comparatively high wages they must pay to attract qualified workers, California banks charge depositors more than banks elsewhere do for many of me services they offer.

(D) The proportion of consumers who default on their personal loans is lower in California than in any other region of the United States. --> here proportion of consumer is irrelevant to the conclusion you need something weakening the relation that due to less banks the interest is higher but A provides another reason why interest rates are higher._________________

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If my reply /analysis is helpful-->please press KUDOSIf there's a loophole in my analysis--> suggest measures to make it airtight.

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06 Apr 2012, 07:34

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cangetgmat wrote:

pls explain choice D, i am inclined for D

Unfortunately D can be inferred in 2 ways, one is why you think this is the answer, and the other is "The proportion of consumers who default on their personal loans is lower in California than in any other region of the United States." Which means the risk is low in giving out a personal loan, so ideally the rates should be low. If a market is risky or if a loan is unsecured you will be charged high e.g. credit cards.
_________________

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(E) Interest rates paid by California banks to depositors are lower than those paid by banks in other parts of the United States because in California there is less competition to attract depositors.

Even this option brings in new reason of high interest rate on personal loan. This is how I interpreted it:

There are fewer banks in Cal Fewer banks so less competition Less competition so these banks offer less interest rate on deposits Less interest rate so they get less deposits (because depositors are less attracted) Less deposits so bank has less fund to disburse as loan Less fund to disburse hence bank increased the interest rate on loan

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(E) Interest rates paid by California banks to depositors are lower than those paid by banks in other parts of the United States because in California there is less competition to attract depositors.

Even this option brings in new reason of high interest rate on personal loan. This is how I interpreted it:

There are fewer banks in Cal Fewer banks so less competition Less competition so these banks offer less interest rate on deposits Less interest rate so they get less deposits (because depositors are less attracted) Less deposits so bank has less fund to disburse as loan Less fund to disburse hence bank increased the interest rate on loan

As per me this is what happens in practical also.

Please let me know whats wrong with this reasoning.

Amrita, your point is valid but let's look again at the ACs.(E) is more like another premise of the argument but (A) weakens the conclusion by stating an idea that the banks do pay huge salary to hire and retain best officers so the interest rates on personal loans are high.

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(E) Interest rates paid by California banks to depositors are lower than those paid by banks in other parts of the United States because in California there is less competition to attract depositors.

Even this option brings in new reason of high interest rate on personal loan. This is how I interpreted it:

There are fewer banks in Cal Fewer banks so less competition Less competition so these banks offer less interest rate on deposits Less interest rate so they get less deposits (because depositors are less attracted) Less deposits so bank has less fund to disburse as loan Less fund to disburse hence bank increased the interest rate on loan

As per me this is what happens in practical also.

Please let me know whats wrong with this reasoning.

Amrita, your point is valid but let's look again at the ACs.(E) is more like another premise of the argument but (A) weakens the conclusion by stating an idea that the banks do pay huge salary to hire and retain best officers so the interest rates on personal loans are high.

Hope this helps !!

I understand A also weakens it, but this would be my second choice. On the D day I'll end up choosing E.....looking for some concrete reason to discard this option.

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23 Jun 2016, 03:44

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